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62 The following step-by-step process will guide you through prepar ation of a cash ﬂow projection: Step 1: Cash on hand Count your cash at the beginning of the ﬁr st month of your projection. This amount is your “cash on hand”. In succeeding months, the ending cash balance from one month will be carried over as the beginning cash balance of the next month. Step 2: Cash receipts Record cash sales, credit card sales, collections from credit accounts, and any interest income. The key to doing this successfully is recording receipts in the months you actually expect to get the money, not the month a s ale is made. Step 3: Accounts receivable Record anticipated receivables in the months you expect them to be paid. If you have not kept records that show you how long it takes individual customers to pay their bills, calculate your ‘average collection period’ by dividing your total sales for the previous year by 365. That gives you your average daily sales volume. Then, divide the dollar value of your cur rent accounts receiv able by the aver age daily sales volume. That number is the aver age number of days it takes you to collect on a bill. Using that number as a guide, record payments as they come in over the next year. management Projecting Cash Flow By Rajarshi Ray, Head of Small Business Services, American Express Cash ﬂow problems often catch small business owner s by surprise. An accur ate cash ﬂow projection can protect entrepreneurs against this situation. A cash ﬂow projection charts the amounts of money your business expects to receive and pay out each month in a rolling six- or twelve-month period. This forecast takes into account: the lag time between billing your clients and getting paid; incurring an expense and paying for it; and collecting taxes that aren’t due to the gover nment until a later date A well-prepared cash ﬂow projection will allow you to plot anticipated cash ﬂow positions over time. It will help you anticipate shortfalls in time to do something about them, protecting you from a cash ﬂow crisis. Also, a cash ﬂow projection can help you spot sales trends, tell you if your customers are taking too long to pay, and help you plan for major asset purchases. In addition, should you decide to seek a loan, banks will ask to see one-year cash ﬂow projections by month, and three- to ﬁve-year projections by quarter. Step 4: Miscellaneous cash Account for anticipated miscellaneous cash infusions, including new loans from banks or family members, or stock offerings. Step 5: Total cash available For each month in your projection, add the amounts in steps one through four. This ﬁgure shows the total cash available to you in each month. Step 6: Cash paid out Now it’s time to calculate how much cash you anticipate spending in each month of your rolling projection. Fir st, assess oper ating expenses. Again, the secret is to note every expense in the month it will be paid, not the month it is incurred. Be sure to include the following items in your list of oper ating expenses: >> Gross wages, including anticipated over time >> Monthly stipends to owners >> Payroll taxes and beneﬁts including paid vacations, paid sick leave, health insurance and unemployment insur ance >> Subcontracting and outside ser vices, including the cost of labour and materials >> Purchases of materials for use in making your product or ser vice, or for resale >> Supplies for use in the business >> Repairs and maintenance (be sure to include occasional large